Private equity firms keep powder dry

When Dubai World said it was in talks to sell a stake in its port unit in May, hopes were high that this could represent a turning point for the Gulf’s subdued private equity industry.

Three months later, the deal between the Government-owned DP World and Dubai-based Abraaj Capital has not happened. It has become symbolic for the inertia that has replaced the fundraising frenzy of recent years. That period helped lift the international profile of the Gulf’s private equity industry on the global stage. Now players are grappling with the uncomfortable new realities of a world that is de-leveraging and where funds are scarce.

The uncertain outlook for regional stock markets has also made it difficult for private equity firms to exit their investments through the once lucrative initial public offerings (IPO). “With attractive exit options scarce at present, the focus for many private equity firms is now the enhancement of performance of their existing portfolio,” says Vikas Papriwal, a partner at KPMG, in the firm’s annual report on private equity. “Entities now look to weather the storm.”